Total revenue rose to $31.3 million for the second quarter ended June
30, 2008 over the $28.2 million reported for the same period in 2007, an
increase of 11%. Revenue from proprietary products and services for the
second quarter increased by 13% over the same period last year. System
shipments totaled 540 units for the second quarter of 2008, versus 564
for the same period last year.

GAAP net income increased 13% to $4.1 million for the second quarter, or
$0.19 per share, compared to GAAP net income of $3.6 million, or $0.17
per share, for the same period in 2007. The 2007 results have been
adjusted to reflect the two-for-one stock split completed in August,
2007.

Stock-based compensation expense required under Financial Accounting
Standard (SFAS) 123R was approximately $268,000 net of tax, or $0.01 per
share for the second quarter of 2008, and approximately $131,000 net of
tax, or $0.01 per share, for the same period in 2007.

Total revenue rose to $62.0 million for the six month period ended June
30, 2008 over the $55.6 million reported for the same period in 2007, an
increase of 12%. Revenue from proprietary products and services for the
six month period increased by 14% over the same period last year. System
shipments totaled 1,117 units for the six month period, versus 1,112 for
the same period last year.

GAAP net income increased 16% to $7.9 million for the six month period,
or $0.37 per share, compared to GAAP net income of $6.8 million, or
$0.32 per share, for the same period in 2007.

Stock-based compensation expense required under SFAS 123R was
approximately $529,000 net of tax, or $0.02 per share for the six month
period of 2008, and approximately $343,000 net of tax, or $0.02 per
share, for the same period in 2007.

“Our second quarter results were driven by the
continued strength in our high-end FDM system business, which grew by
33% over the same period last year,” said
Scott Crump, chairman and chief executive officer of Stratasys. “FDM
system sales benefited from the ongoing success of our recently
introduced products, as customers are valuing their improved
functionality for making prototypes. More importantly, they are
increasingly using the new systems for making functional parts, also
known as direct digital manufacturing (DDM).

“Our success in targeting these new
applications was highlighted by the recent order for five of our largest
additive fabrication systems, the FDM 900mc, which will be used
expressly by the customer for DDM. We estimate that approximately one
third of all our high end systems sold during the second quarter will be
utilized for DDM, in some frequency. We remain excited about these
emerging applications, and as the second quarter reflects, we are
generating significant incremental business from these new opportunities.

“Within the 3D printing business, our
direction over the past two years has been a departure from our
longer-term vision of driving adoption through greater affordability.
Our recent strategy has included the introduction of higher-priced 3D
printers that provide customers with improved functionality. This has
produced some unanticipated results, as our resellers have focused their
efforts on these new systems, resulting in a disproportionately higher
level of sales for our full-feature 3D printers compared to the
lower-priced units.

“While the strong sales of higher-priced 3D
printers have positively impacted our average printer prices and
margins, total 3D printer unit volume lagged our expectations during the
second quarter. We believe this trend reflects the difficulty in selling
a relatively new technology to domestic customers that are contending
with a weakening environment for manufacturing, and are less inclined to
make innovative investments. We believe new initiatives planned for 3D
printing over the coming quarters will improve the performance of the
business.

“We continue to observe positive trends within
our paid parts business, as we have instituted organizational changes,
and are making improvements to our sales and marketing efforts. Total
paid parts revenue increased 5% year-over-year in the second quarter
following the 12% decline in year-over-year revenue in the first quarter
of this year. In addition, paid parts revenue was up 25% sequentially
for the second quarter. Total registrations on our RedEyeRPM.com web
site during the second quarter increased by 43%, and the number of
first-time customer orders increased by 53% compared to last year.

“We were pleased to announce the installation
of our 10,000th system in June to Peugeot Citroën,
which purchased a high-precision FDM 400mc for the automaker’s
engineering facility. We have now sold more systems in the past three
years than in our company’s prior
fifteen-year history. This expanding base of systems is contributing to
growth in our proprietary consumable and maintenance revenue, which both
increased by 17% during the second quarter versus last year.